March 15 (Bloomberg) -- The cost of goods imported into the
U.S. rose more than forecast in February, led by further gains
in commodities that companies are struggling to pass along to
their customers.

The 1.4 percent increase in the import-price index exceeded
the 0.9 percent median estimate in a Bloomberg News survey and
followed a 1.3 percent rise in January, Labor Department figures
showed today in Washington. A measure of prices paid by
factories in the New York region jumped this month to the
highest level since August 2008, according to another report
that also showed manufacturing picked up.

Expanding economies in Asia and Latin America are
generating greater demand for raw materials, and turmoil in
Libya has pushed up crude oil prices. While Americans are paying
more at gas stations and grocery stores, higher commodities
costs will be “transitory,” a reason Federal Reserve officials
today reaffirmed plans to buy $600 billion in Treasuries to spur
growth.

“Underlying price pressures aren’t doing much,” said
Stephen Gallagher, chief U.S. economist at Societe Generale SA
in New York, who forecast a 1.5 percent February increase.
“Companies that can’t really pass along the higher costs are
being forced to absorb them.”

Prices excluding fuel rose 0.3 percent in February, less
than half the 0.7 percent jump a month earlier, today’s Labor
Department report showed. The cost of consumer goods was up 0.3
percent from the same month in 2010.

Stocks Slump

Stocks fell after Japan struggled to cool three nuclear
reactors damaged by last week’s earthquake and tsunami. The
Standard & Poor’s 500 Index dropped 1.1 percent to 1,281.87 at
the 4 p.m. close in New York. Treasury securities increased,
pushing down the yield on the benchmark 10-year note to 3.30
percent from 3.35 percent late yesterday.

Strength in U.S. manufacturing from earlier this year
continued into March, a Fed report showed. The Fed Bank of New
York’s general economic index rose to a nine-month high of 17.5
from 15.4 in February. Readings greater than zero signal
expansion in the so-called Empire State Index, which covers New
York, northern New Jersey, and southern Connecticut.

The report showed a gauge of prices paid by factories for
raw materials rose to 53.3 in March from 45.8. Other components
indicated manufacturing may be hard-pressed to accelerate in
coming months. Figures on new orders and shipments showed slower
growth.

Factories are paying more for raw materials, the Labor
Department report showed. The cost of imported petroleum
increased 3.7 percent from the prior month, and was up 21
percent from a year earlier, the most since May 2010.

Higher Food Costs

Import prices excluding all fuels rose 3.6 percent from
February 2010, the biggest gain in more than two years, partly a
reflection of food costs. Food costs over the past 12 months
posted the biggest gain since records began in 1977.

Increases in commodity prices in recent months mainly
reflect “rising global demand for raw materials, particularly
in some fast-growing emerging market economies, coupled with
constraints on global supply in some cases,” Fed Chairman Ben
S. Bernanke told lawmakers on March 1. That suggests a
“temporary and relatively modest increase in U.S. consumer
price inflation,” he said.

Fed officials said in a statement at the end of their
policy meeting today that the effects of higher commodity costs
on inflation will be “transitory.” Policy makers said they
will pay close attention to the evolution of inflation and
inflation expectations.”

Preferred Gauge

The central bank’s preferred price gauge, which excludes
food and fuel, rose 0.8 percent in January from a year earlier,
matching December’s year-over-year gain, the smallest in five
decades of record-keeping. Fed officials aim for long-run
overall inflation of 1.6 percent to 2 percent.

Imported goods are also more expensive because of the
weakening dollar. Since reaching a one-year high on June 7 of
last year, the dollar has fallen 9 percent against a trade-weighted basket of major currencies.

Neiman Marcus Group Inc., a luxury retailer, is among
companies seeing varied price pressures depending on where their
products are manufactured. Europe accounts for the majority of
the Dallas-based company’s imports, and the euro has been
relatively stable compared with the dollar, according to Chief
Executive Officer Karen Katz.

Commodity Costs

“Prices are not moving more than a little bit on goods
coming out of Europe,” Katz said on a March 11 conference call.
On indirect imports from China and Asia, bought through vendors
who produce there, “we are seeing some price inflation in those
areas due to commodity prices as well as big labor increases,”
she said.

The import-price index is the first of three monthly price
gauges from the Labor Department. Producer prices are due
tomorrow and the consumer-price index on March 17. The Bloomberg
survey median for those measures indicates inflation excluding
volatile food and fuel expenses remains contained.

Another report today showed confidence among U.S.
homebuilders rose in March to the highest level since May 2010.
The National Association of Home Builders/Wells Fargo sentiment
index climbed to 17 from a February reading of 16 as more firms
anticipated stronger sales in the next six months. Measures less
than 50 mean more respondents said conditions were poor.